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An International Affair: (Some) RIAs Go Abroad

Deal-making in the wealth management space has been rampant lately, and some wealth management-holding companies and individual RIAs are beginning to see opportunities in Europe. But heading across the pond may not be for everyone.

Deal-making in the wealth management space has been rampant lately, and some wealth management-holding companies and individual RIAs are beginning to see opportunities in Europe. But heading across the pond may not be for everyone.

Focus Financial Partners, a two-year-old holding company with 15 RIA partners, and over $26 billion in assets under management, just acquired U.K.-based Greystone Financial Services for an undisclosed amount. The deal marks the first international acquisition among the major holding companies, and has some wondering whether it will launch a race across the pond for more firms. Dennis Gallant, a principal with Gallant Distribution Consulting in Sherborn, Mass., says the deal gives Focus Financial a foothold in a region where financial advisory business is growing at a rapid pace.

Rudy Adolf, Focus Financial’s founder and CEO, says making acquisitions overseas has always been on his firm’s agenda but, “We didn’t want to talk about it because we wanted to make sure the firm was rock solid in the U.S. space.” The acquisition of Greystone, which serves more than 5,000 high-net-worth individuals and corporations with more than $1.6 billion in assets under management, gives Focus a stake in a major financial services hub with an arguably faster-growing market than here at home.

Another driver: Adolf believes the U.K. has the potential for more international partnerships with other firms. “I hate to say it, but London attracts more international players than New York.” He’s not the only one who thinks so. Sontag Advisory, a Westport, Conn.-based RIA with over $4 billion in assets is also looking for partners outside the U.S. Mike Delgass, an advisor at the firm, says Sontag is currently seeking out deals in places like England and Switzerland. “We’re looking for other partners, but not necessarily for the clients and the assets,” he says. “We’re looking for ways to get access to the best managers, and those are increasingly not just in New York.”

But Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy-consulting firm for financial institutions and investment managers, says RIA acquisitions overseas are likely not in the cards for too many other firms. “Focus is one of the few companies that can make a deal like this. It seems like a strategy for a big player. I’d tell anyone else to stick close to their knitting,” he says.

That’s exactly what Rusty Benton, CEO of WealthTrust, a Nashville, Tenn.-based holding company, is doing. The firm was spun out of Morgan Keegan in November 2006, and since then it’s made 14 U.S. acquisitions, totaling about $9 billion in assets under management. Benton says he’d never completely rule out an acquisition abroad, but that it’s not currently a priority for his firm. “I’d imagine there are a lot of cultural issues involved, and the sheer logistics from a management standpoint are a challenge,” he says. Besides, he adds, “It’s easier to manage a firm in Cincinnati than it is in Tokyo.”

Not only that, but some say the opportunities for acquisitions at home are still vast. Joe Duran, CEO of United Capital Financial Partners, a holding company in Newport Beach, Calif., says his firm is not even exploring an international deal. His firm currently has 15 advisory partners, totaling about $8 billion in assets under management. “You go overseas when you’ve maximized your local market, but we’re still on a fast growth plan here in the U.S.,” he says. Also a deterrent, according to Duran, is the need to adjust to foreign financial regulatory rules. “We can’t possibly know all the regulations overseas. For us, there would be way too many risks,” he adds.

Adolf may have an advantage there though. He says getting involved with European- based firms is not much of a challenge since he’s acted as consultant to many in his days as an executive at American Express and partner at McKinsey & Co. “These are home markets for me,” he adds. Besides, Focus Financial still considers the U.S. its core market place. “By no means are we done with the U.S. We are still extremely excited about the market here, and we’ll continue to acquire here.”

Focus launched in January 2006 with $35 million in backing from Summit Partners, a private equity/venture capital firm that has backed companies such as office-supply retail chain Staples.com and Chicago-based optionsXpress, an online brokerage firm.